Question

Zinnia Company:

Zinnia Company incorporated on January 1, 2017.  The company had authorized 1,500,000 shares of common stock, with a par value of $5 per share.  The company had the following transactions during 2017:

Jan. 15     Issued 50,000 shares of common stock for $8 per share.

Sept.  1   Repurchased  5,000 shares of their common stock for $7 per share.

Nov. 1      Declared a $.50 per share cash dividend to be paid on Dec. 30 to stockholders of record on Dec. 1.

Required:

1.  Prepare the necessary journal entries to record the above transactions.  (12 points)

2.  Assume that Zinnia Company declared a 15% stock dividendon Nov. 1 instead of a cash dividend.  If the stock was trading at $10 per share on Nov. 1, what journal entry would the company record on Nov. 1?  (3 points)

Answer 1

Journal Entries
Date	Account Title and explanation	Debit	Credit
	Cash ( 50,000 shares X $ 8)	$                   4,00,000
Jan, 15 2017	To Common Stock (50,000 shares X $ 5)		$                 2,50,000
	To Addittional paid in capital - common Stock		$                 1,50,000
	(To Record the issue of common shares )
	Treasurry Stock (5000 Shares X $ 7 )	$                       35,000
Sept, 01 2017	To Cash		$                     35,000
	(To Record the purchase of treasurry stock)
Nov, 01 2017	Retained Earnings	$                       22,500
	To Dividend Payable		$                     22,500
	(To record the dividend declares)
	Notes:
	total issue of shares =	50,000
	Less: Purchase as treasurry stock	5,000
	Eligible for Dividend	45,000
	X By Dividend per shares =	$                            0.50
	total Dividend =	$                 22,500.00
	Record the stock dividend in place of cash dividend
	Retained Earning ( 6,750 Shares X $ 10 )	$                       67,500
Nov, 01 2017	To Common Stock Dividend Distributable		$                     67,500
	(To Record the stock dividend)
	total issue of shares =	50,000
	Less: Purchase as treasurry stock	5,000
	Eligible for Stock Dividend	45,000
	X By Dividend per shares =	15%
	Total new shares issue =	6,750.00